From: Financial & Managerial Accounting (19th Edition) by Haka, Williams, Carcello. ISBN 9781260247930

Chapter 17

Exercise 17.10

Journal Entries, Cost Flows, and Financial Reporting

Marshall uses a job order costing system to account for projects. It applies manufacturing overhead to jobs on the basis of direct labor hours and pays its direct labor workers $30 per hour. The following information relates to the month of December (some of it may not be used in this exercise).

Manufacturing overhead budgeted (estimated on December 1) $160,000

Budgeted driver activity (DLH) (estimated on December 1) 2,000 DLH

Direct materials purchased in December $130,000

Direct materials used in December 140,000

Actual direct labor costs in December 72,000

Actual manufacturing overhead in December 198,000

Cost of jobs completed in December 390,000

Sales generated in December 750,000

Cost of goods sold in December (prior to adjusting for overhead) 422,000

Selling and administrative costs in December 270,000

Materials Inventory, December 1 30,000

Work in Process Inventory, December 1 60,000

Finished Goods Inventory, December 1 180,000

a. Record the purchase of direct materials in December. Assume all purchases are made on account.

b. Record the cost of direct materials applied to jobs in December.

c. Record the cost of direct labor applied to jobs in December.

d. Record the actual cost of manufacturing overhead incurred in December. Assume all overhead costs were paid in cash.

e. Record the cost of manufacturing overhead applied to jobs in December.

f. Record revenue and the related cost of jobs sold in December (prior to adjusting for overhead). Assume all sales are made on account.

g. Record December selling and administrative costs. Assume all selling and administrative costs were paid in cash.

h. Close the Manufacturing Overhead account directly to Cost of Goods Sold on December 31.

i. Compute the company's December income. Ignore taxes.